If EPS Growth Is Important To You, MaxiPARTS (ASX:MXI) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like MaxiPARTS (ASX:MXI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for MaxiPARTS

How Quickly Is MaxiPARTS Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that MaxiPARTS has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note MaxiPARTS achieved similar EBIT margins to last year, revenue grew by a solid 32% to AU$202m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of MaxiPARTS' forecast profits?

Are MaxiPARTS Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in MaxiPARTS in the previous 12 months. With that in mind, it's heartening that Frank Micallef, the Independent Non-Executive Director of the company, paid AU$50k for shares at around AU$2.39 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in MaxiPARTS.

Should You Add MaxiPARTS To Your Watchlist?

For growth investors, MaxiPARTS' raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out MaxiPARTS in more detail. However, before you get too excited we've discovered 1 warning sign for MaxiPARTS that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, MaxiPARTS isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.